Bear Stearns (NYSE: BSC) shareholders have raised the ante to the ceiling in terms of shareholder activism. Previously, an activist was limited to only inflicting pain on management or the board to eke out concessions and improve the company. But BSC holders have the gun right to the head of the entire US financial industry and it went something like this.

Weekend 0: Listen rest of the world, we stock holders may have negative value and the bondholders should lose money, but that’s just your reality, not ours. It’s pretty simple and it goes like this. If you don’t pay us more, we will bring the whole thing down — we will do it so pay us the money. Pay us $2 and we will go away quietly, and the bond holders would be pleased. You have 24 hours or we blow it all up.

Week 1: JP, we’ve been thinking. No, not about that hooker with the dysentery. Yeah. Haha. No, we never heard that variation. That’s a good one. No really it was good JP, the delivery needs some work but you’ll get it there. Just practice in front of a mirror or your mistress. Anyways, yeah, we have thought about it and that $2 per share for our stock is not enough. What about $10? JP, you got that cash lying around, right? Even if you don’t, here’s what you do, ok? Call the Fed, and ask for Bernanke. Get him to give us at least $29bn in capital, not a penny less. Tell them if he doesn’t do it, we will vote down the deal and blow it all up. Illegal schmegal, he’ll do it. Tell him he has 24 hours.

Week 1.5 to Present: Ok we have $10 but now based on how stable things look, we should be getting at least $15. It’s pretty clear that we’re worth a lot, especially now that the Fed has given us $29bn of the taxpayers money. Btw thanks Taxpayers, we were worried for a sec back there that we might lose some money because we invested in a company that took on way too much risk, never deleveraged enough and that got caught in a squeeze. God forbid, that the equity holders, much less the unsecured bond owners be forced to take a zero or a hit in such a situation. Back to the matter at hand. We want $15 per share in the next 24 hours, or we will blow it all up. All it up. All it. Everything. It. Blown up.

Recommendation:

Pick a company that is too big too fail (basically anything publicly traded and kinda banky) that has traded down to sub-small cap levels

Comments

It’s a game theory question for people who aren’t good at more complicated game theory: I can risk a reasonable amount or I can bet the house, several times over. If I risk a reasonable amount, I might make a good return but also I might lose some money. However, If I bet everything several times over, I stand to make a bloody fortune and I’ll limit my losses because if I crash and burn, our trusty Fed will force taxpayers to pay for my put. Awesome. I’ll take option number two, please.

The awesomest of all awesomeness is that Paulson was just on TV talking about how the Fed’s powers of offering taxpayer funded puts to investment banks will be expanded. I’m totally pscyched. Merrill’s only up 0.5%, I gotta run and scoop that right up.

Week 6: You know, we’ve been thinking. While the donation of all of the gold reserves the United States currently has is appreciated (and we made some nice mini-baller jewelry out of it too), that’s not enough. After all, we are master of the universe, right? Yeah, that’s right. So we’ve decided you have 24 hours to give us the nuclear launch codes for all nuclear weapons, because we’re the new superpower. You have 24 hours, or we blow it all up. We’re serious here. Gone.

If I owe you $10,000,000 I have a problem. If I owe you $10,000,000,000 YOU have a problem.

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